Apollo Hospitals grew profit 32% as more of its beds were occupied and its pharmacy and digital business improved. It has also completed a ₹1,550 crore asset sale and announced a large expansion.
Apollo Hospitals Enterprise reported consolidated net profit of ₹630 crore for the September quarter, up 32% from ₹477 crore a year earlier. Revenue rose 23% to ₹7,615 crore, and EBITDA rose 29% to ₹1,191 crore, a margin of about 16%.
The results were slightly above estimates. Zee Business had estimated profit of ₹629 crore and revenue of ₹7,481 crore.
For the first half, revenue rose 22% to ₹14,547 crore, EBITDA 29% to ₹2,268 crore and profit 33% to ₹1,211 crore.
Occupancy is the key driver
The healthcare services business, Apollo’s hospitals, grew revenue 23% to ₹3,900 crore from ₹3,169 crore. Bed occupancy rose to 73% from 69% a year earlier.
Occupancy is the most important number for hospital businesses. A hospital’s costs, such as buildings, equipment, doctors and nurses, are largely fixed. Each additional patient adds revenue with relatively little extra cost, so higher occupancy has a large effect on profit. A rise from 69% to 73% helps explain why EBITDA grew faster than revenue.
The results were also supported by more international patients, according to reports, and by improved performance across business segments.
Apollo HealthCo, which includes the pharmacy distribution and digital health business, grew revenue 23% to ₹3,286 crore. EBITDA was ₹193 crore and profit ₹118 crore. HealthCo was loss-making not long ago. Its improving profitability is important for Apollo’s overall valuation, since it has been one of the main concerns for investors.
Expansion and a completed sale
Apollo completed the sale of its Apollo Specialty Hospitals and Apollo Fertility businesses to Kids Clinic India, which operates Cloudnine, for ₹1,550 crore. The sale lets Apollo focus on larger, multi-specialty hospitals and raises cash for expansion.
The company also announced a five-year plan to add 5,800 beds. A new 470-bed hospital in Gurugram is expected to begin operating in the December quarter.
The expansion matters because Apollo’s existing hospitals are filling up. At 73% occupancy, there is still room to grow, but many of its best-performing hospitals are already busy. New beds are needed for growth beyond the next two or three years.
The expansion carries some risk. New hospitals usually lose money for their first two to three years as they build up patient numbers. Adding 5,800 beds over five years means a steady flow of new hospitals that will weigh on margins while they ramp up. Apollo will need its mature hospitals and HealthCo to keep growing strongly to offset that.
What investors will look for
The results came after market hours on Wednesday, so the share price reaction will come on Thursday. Results that beat estimates on profit, revenue, EBITDA and margins usually support a stock.
India’s hospital sector has been one of the market’s steadier performers, supported by rising health insurance coverage, growing demand for specialist care, and medical tourism. Apollo’s results suggest those trends are continuing. The key questions for investors are how quickly the new beds become profitable, and whether HealthCo’s profitability keeps improving.
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